LB 405 would impose sales tax on health care & RX drugs

AARP says regressive measure would drive up health care and prescription drug costs

LB 405 would do away with sales tax exemptions for rooms in licensed health care facilities and hospitals and make Nebraska one of six states to impose a sales tax on prescription drugs, driving up health care costs for consumers.

In testimony before the Revenue Committee today, AARP Nebraska urged lawmakers to reject LB 405.

“Our interests as a state and a nation will best be served by trying to identify and implement steps to control health care costs,” said Mark Intermill, advocacy director with AARP Nebraska. “By taxing health care services, LB 405 does exactly the opposite.”

For hospitals, adding sales tax to room rent will increase the cost of hospital care. These costs will be paid by consumers either through higher health insurance premiums, higher costs for publicly-financed health care programs or larger amounts of uncompensated care.

By taxing rooms in nursing facilities that are rented for less than 30 days, LB 405 will increase costs for residents who are paying for care from their own resources.

“This will accelerate the process of spending down to Medicaid eligibility and will increase the number of days of care covered by Medicaid at taxpayer expense,” Intermill said.

By eliminating the sales tax exemption for prescription drugs, Nebraska would become one of five states that apply the full sales tax levy on medications. (Illinois levies a partial sales tax on prescriptions.) Adding sales tax to prescription drugs will increase out-of-pocket costs for Nebraskans who are uninsured, have high deductible plans or reach the “doughnut hole” coverage gap under Medicare Part D plans.

Intermill added that AARP also opposes LB 405 because it is regressive in nature and might not generate enough revenue to offset elimination of individual and corporate income taxes.

According to the Forbes Best States for Business rankings, Nebraska has a higher rank than any of the seven states that either don’t have a state income tax or have a very limited state income tax. Intermill noted that of those seven states, all but one is ranked in the bottom half of the Quality of Life measure.

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